Disruptive change is taking place across practically every industry today, and technology is driving it.
As customer needs have evolved, organizations have been provided with little choice but to implement new technologies that enable them to meet these growing expectations.
More than half of all startup enterprises have developed a digital business strategy, followed by just over one third of established organizations. And while there is an almost never ending list of technologies that can bring value to modern businesses, some of the most widely adopted solutions today include big data analytics, mobile tech, cloud computing, and the Internet of Things (IoT).
It is clear that today’s businesses need to stay on top of the latest technologies and keep adapting their processes in response to changing customer behaviors if they are to remain competitive. However, implementation of new tech is also creating a new problem. That is, businesses are changing, but their people are not. There’s a disconnect between business and employee, and workforce planning can help.
What is workforce planning?
While technologies like big data and IoT focus on the business side of change, workforce planning focuses on the often overlooked people side of change. Simply put, workforce planning is a people strategy that creates a business-driven workforce.
There’s a classic saying: “if HR gets involved at the time of recruitment, it’s too late.” And while we’re not specifically talking about hiring here, this is a saying that is very important in terms of workforce planning. It’s a phrase that’s used to highlight the integral role that HR plays in the core business, and demonstrates how collaboration between HR and other departments could contribute to success.
Is workforce planning a new way of thinking?
Despite all the recent talk of workforce planning and the growing trend workplace efficiency, the concept is far from new. The idea of workforce planning was actually first discussed a number of decades ago, but popularity began to decline during the 1980s, primarily due to the challenges in forecasting. Workforce planning relies on the anticipation of future business needs, and this hasn’t always been easy.
Workforce planning is back on everyone’s lips, and the reason is the big data capabilities of modern businesses which make forecasting easier than ever before. Businesses now have both the tools and the data they need to predict their future requirements, yet adoption of workforce planning is slow.
“Overall progress in workforce planning and the capability of supporting functions is slow, with most organizations focusing on the requirements for shorter-term horizons” according to a report by PwC. It is understood that only one third of today’s businesses use any form of advanced workforce planning or predictive analysis, despite these methodologies contributing towards overall business success.
6 stages of creating a workforce planning strategy
Now, let’s explore the six stages of creating a top-notch workforce planning strategy in more detail.
1. Understanding the organization
First, it’s important to understand that there is no ‘one size fits all when it comes to workforce planning. A workforce planning strategy is developed in line with a business’ own needs and future requirements, so these strategies are typically unique to each individual organization.
Understanding what the organization needs are and how the business defines success is, therefore, a key prerequisite to creating an effective strategy.
2. Workforce analysis
Analysis of the existing workforce, and of existing ways of working, forms an integral part of any good workforce planning strategy. It tells an organization where it is now, and creates a starting point for getting to where it needs to be.
However, it is clear that analytics progress has been slow. Few businesses are going above and beyond basic operational levels of analysis such as HR tools and metrics. In fact, only 11% admit to analyzing at a planned level and just 1% at strategic level.
3. Predict future needs
The overall aim of workforce planning is ensure a business has a team onboard that helps them to meet their goals, so when developing a strategy the future workforce needs of the business need to be taken into account.
Unfortunately, this is where many organizations fail, with around 60% admitting that they do not look further than three years into the future. Additionally, 72% lack confidence in their ability to predict future workforce needs.
4. Identify gaps
Organizations may have the workforce they need to continue operating using their existing processes, but when developing a workforce planning strategy it’s essential to consider where skills gaps may appear as the business changes and adapts. It’s about understanding what the business has, and what it’s likely to need to meet predicted requirements.
5. Generate strategy
Once an organization has determined business needs, conducted analysis of the existing workforce, predicted future workforce needs, and identified potential skills gaps, a workforce planning strategy can be designed and implemented.
The strategy should draw upon real data and data analysis to assign, redeploy, and utilize workers in a way that optimizes employee performance, as well as helps HR teams to recruit strategically. It is also important to offer support for line managers during periods of change and consider if upskilling and reskilling employees is a viable option to be included in the strategy.
6. Assess action
Developing a good workforce planning strategy doesn’t end with implementation of the plan. It’s important to review the strategy in action to ensure it is having the desired effect. Businesses should be clear on what key performance indicators they will use to measure the success of the strategy.
There are a number of valuable KPIs for this purpose, including measuring the percentage of strategically critical roles without a successor, the number of open strategic positions, and presence of underperformers.
Benefits of workforce planning
While creating an effective workforce planning strategy can require some effort, research suggests that having a strong plan in place is worth the initial work. It is estimated that businesses who deploy these strategies are around 66% more likely than their counterparts to successfully boost the performance of their human resources without increasing headcount, offering greater productivity without the cost.
Reduce labor costs
Labor costs across the United States have been on the rise, with a 2.9% year-over-year rise in 2018 marking the biggest increase in a decade. They have fast become one of the biggest challenges facing growing organizations today, but workforce planning could prove to be an effective solution. Deloitte presents a case study of a large financial services company who, after using a workforce planning strategy to redeploy extra staff, noted an average $6 million saving for every 100 employees who had been reassigned under the scheme.
Respond to changing customer needs
At a time when customer needs, preferences, and expectations are changing and evolving at a rapid rate, a workforce planning strategy can help businesses to better respond to these needs through comprehensive scheduling analysis.
A strategy can help to deploy staff effectively in line with predicted demand (assigning more staff to busier periods, for example), resulting in improved customer care, higher levels of satisfaction, and boosted brand loyalty; three factors which have become urgent priorities for businesses as they strive to stand out from the crowd amidst a competitive landscape.
Identify strategies for people-focused development
Perhaps one of the biggest benefits of implementing a workforce planning strategy is that it not only highlights what a business is doing right, but also demonstrates what it could be doing for a bigger effect on profits and revenue.
Workforce planning makes it easier for organizations to design progression pathways based on individual workers’ own unique skill sets, rather than simply what they’re expected to achieve within the confines of any given role. By placing less priority on traditional workplace roles, and giving more focus to people development, firms can derive more value from their employees.
Almost all businesses will have in-house processes and standard ways of working which, while familiar, may not facilitate optimal performance amongst employees. These are inefficiencies, and one of the biggest inefficiencies affecting businesses today is taking a reactive approach to situations.
Deloitte research reports that reactive approaches to skills gaps within the workforce can result in a 3 to 5% rise in labor and labor-related costs. Workforce planning is based on the concept of accurate labor forecasting, and helps businesses to understand how they can fully utilize their data to predict and be proactive.
Improve employee retention
Employee retention is becoming a growing concern across the United States, with the average employee typically spending less time in a role than ever before. The forms a financial obstacle for organizations, with the cost of hiring falling at somewhere between 1.5 and 3 times the annual salary. But businesses could successfully reduce the need to fill vacancies and extend the lifespan of their workforce through proper workforce planning and workforce management.
By focusing on people, by drawing upon the unique skill sets of the individual, and by re-assigning workers to suitable environments, it is possible to significantly boost job satisfaction.
Enhance employee experience
Of course, employees are more likely to remain in a position if they have a positive employee experience, and this is yet another area where workforce planning can be used. More than half of all HR leaders believe that the key to employee engagement is a shared mission between the employee and the business, which is what a workforce planning strategy sets out to achieve.
By using data analysis and prediction to utilize employees in the most valuable way, businesses are working to align organizational goals with personal goals and, ultimately, are helping employees feel more connected to the company.
The future of workforce planning
Although reports suggest that adoption of workforce planning has been slow, we can reasonably expect the concept to take off over the next few years as a new generation of employees enters the workforce. It’s estimated that managers from the younger generations are up to three times more likely to prioritize workforce planning than older managers, and with the younger generation expected to make up more than half of the workforce by 2028, marking a nearly 40% increase from today’s figures, it seems safe to say that we can expect to hear much more about the benefits of workforce planning in the future.
Additionally, in the United States, there has been a sharp rise over the past five years in the number of HR professionals promoting their analytics skills, suggesting that collaboration between HR and IT/core business is already underway. Workforce planning is the next big trend for modern businesses, and really can contribute to business success.
Now that you understand workforce planning in and out, find the best workforce management software for your company's needs.